What is your future income

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Reference no: EM133428341

Questions: Assume there are only two periods. You have $20,000 of current income and the maximum you could consume at present is $40,000. The interest rate at which you could borrow or save is 10%.

a. What is your future income?

b. What is the maximum consumption that you could afford in the future if you saved all your current income?

c. If you want to consume $23,100 in the future, do you have to save anything from your current income? If so, how much?

d. Support your answers with a diagram that shows the intertemporal budget constraints. Your diagram should include labels for horizontal and vertical intercepts, the point of no borrowing or saving, and the equilibrium consumption plan from question

Reference no: EM133428341

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